Ashok Leyland Finance reaps dividends

The company's margins and return on the net worth during the first half of this fiscal, went up when others experienced a fall. ALFL ranks first in respect of return on the net worth with 11.9 per cent as against 8.4 per cent, 9.4 per cent and 9.7 per cent of Sundaram, Cholamandalam and Kotak Mahindra respectively.

Predominantly financing purchase of commercial vehicles, used vehicles, cars and earth-moving equipment, ALFL entered the personal products line (two-wheelers and consumer durables) just recently. This fiscal the company has lent Rs 286 crore under this head and ranks second to lending to commercial vehicles. The latter stands at Rs 377 crore. ALFL's total disbursements for the nine month period is Rs 1,284 crore.

The company is staying away from financing consumer durables, as individual accounts will be of small size. In the case of two-wheelers, the per-ticket size is not less than Rs 38,000, whereas it is around Rs 10,000 in the case of durables.

The other segment, from which ALFL consciously stays away, is lending to corporates. "The corporates that come to NBFCs for money are generally bad accounts. "And we experienced that. It took us some time to clean up our balance-sheet of non-performing assets after lending to corporates," says ALFL executive director (operations) SV Parthasarathy. "On the other hand, historically, the retail credit losses are less than 5 per cent."

The new business mix, effective treasury operations and a reduction in transaction costs have had its beneficial impact on the company's profits, too. The after-tax profits went by 65 per cent to Rs 26.07 crore, compared to the previous year's corresponding period.

A pioneer in asset securitisation, ALFL has till now raised Rs 400 crore through this route, out of which Rs 145 crore is from various investors through private placement without recourse. ALFL intends to raise Rs 200 crore in this manner before the close of this financial year. The other sources of funds for the company are term loans from banks and financial institutions (Rs 500 crore), short-term debentures and non-convertible debentures (Rs 200 crore) and fixed deposits from the public (Rs 237 crore). "Our public deposits showed a marginal increase; most of them have a maturity profile of more than one year," he says.